Supply management under siege again as Tory leadership candidate Maxime Bernier drops support

Bernier's shift on supply management comes the same week as Quebec diary farmers are planning a major protest to get the federal government to enforce existing supply management rules. Photo by

Canada’s practice of controlling prices in the dairy and poultry industries came under renewed scrutiny Tuesday as Conservative leadership candidate Maxime Bernier announced he will no longer be supporting the policy and called on other party members to join him.

Bernier revealed his position against the system, known as supply management, at a news conference in Ottawa. He said that Canada should work to rid itself of the policy in the next five to 10 years by providing farmers compensation as a transition is made to a free-market system. Bernier said this would likely cost between $18 billion and $28 billion and come from a temporary levy.

The announcement is a reversal for Bernier, who has long championed supply management — a subject of much debate in Canada.

“There is of course no way to reconcile it,” Bernier said in a statement he released Tuesday. “Supply management is a system based on keeping the prices of dairy, poultry and eggs artificially high through the control of production, the banning of imports, price-fixing by bureaucrats, and on preventing competition and entry into the market. It is a cartel. It is the opposite of free markets.”

The system has allowed the federal government to avoid subsidizing dairy, poultry and egg farming in Canada. Other countries, including those in the European Union and the United States, subsidize their own industries to the tune of tens of billions of dollars.

Supply management is currently supported by all three major political parties and it is particularly popular in Bernier’s home province of Quebec. But it is also divisive. Opponents argue that it is a harmful protectionist policy because it sets quotas on the amount of dairy and poultry produced domestically and limits imports with high tariffs. Such practices are said to stifle consumer choice and creates poorer quality products and inefficiencies in the market.

Bernier’s comments are not the first threat supply management has faced. In October, Canada signed onto the Trans-Pacific Partnership, which if ratified, would open up about 3.25 per cent of the Canadian market to international competition.

That deal was accompanied by a promise by the Conservative government of $4.3 billion in federal subsidies over 15 years to the dairy industry. But Liberal International Trade Minister Chrystia Freeland has said those subsidies will now be under review

The threat of the TPP, combined with a high-profile rebuff from Bernier, aren’t going unnoticed by corporate Canada. The chief executive of Canadian dairy giant Saputo Inc. said last year that the company is preparing for any potential change to supply management, including in the event that it is dismantled.

It is a cartel. It is the opposite of free markets.

“If the system stays as it is in Canada, it’s good for us,” CEO Lino Saputo Jr. said during the company’s annual meeting last August. “If the Canadian system changes, we will adapt.”

Bernier’s shift comes the same week as Quebec dairy farmers are planning a major protest to push thew recently elected Liberals to enforce existing supply management rules. Dairy farmers say they are losing tens of thousands of dollars a year because Canadian inspectors are allowing a U.S. protein — known as diafiltered milk — to get past the border without tariffs because it is currently not considered a dairy product.

Dairy farmers will hold a rally Thursday on Parliament Hill to voice their frustration with the loophole.

Isabelle Bouchard, spokeswoman for the Dairy Farmers, said in an interview that dismantling supply management in favour of a new system — including subsidies — would do little to save the country or consumers money.

“It would still cost money,” she said. “The U.S. farmers are still subsidized every year in order to cover their production costs.”

She also took issue with Bernier’s statements that dairy prices were unreasonably high in Canada compared to the U.S.

“His party, while in government, asked the Senate to do a report on the price discrepancy in Canada and the U.S. and it found everything in Canada is more expensive than in the U.S.,” she said. “It’s wrong to have Canadians think that milk is so much higher in Canada, because milk production is not subsidized here. Even if you don’t drink milk, you’re paying for it in the U.S., because it’s subsidized.”

Peter McKenna, professor and chair of political science at the University of Prince Edward Island, said in an interview that Bernier’s push to dismantle supply management opens up discussion about whether it will be adopted as a platform by the Conservative Party.

“It may very well force the hands of some of the other leadership contenders and force the party to accelerate its position on how much of supply management should be retained and whether we should move further along the lines of, maybe not dismantling supply management entirely, but whether we should open up these industries to more competition,” he said.

Bernier, who in the past championed supply management, said he did so because of his party’s official support for it, rather than his own personal belief.

“I was not in a position to question the party’s democratic decision, or cabinet solidarity,” he said. “And so I went along with it like all my colleagues, even though I had grave misgivings about it for all these years.”

Bernier entered the Tory leadership race in April. He is a self-described “free market guy” who has touted the benefits of removing the government’s hand from the private sector. The Conservatives will vote for a new leader on May 27, 2017.

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